Correlation Between Precision Drilling and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and Bank of Nova Scotia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Precision Drilling and Bank of Nova Scotia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and Bank of Nova, you can compare the effects of market volatilities on Precision Drilling and Bank of Nova Scotia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Precision Drilling with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Bank of Nova Scotia.
Diversification Opportunities for Precision Drilling and Bank of Nova Scotia
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Precision and Bank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and Precision Drilling is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Precision Drilling are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of Precision Drilling i.e., Precision Drilling and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Precision Drilling and Bank of Nova Scotia
Considering the 90-day investment horizon Precision Drilling is expected to generate 2.43 times more return on investment than Bank of Nova Scotia. However, Precision Drilling is 2.43 times more volatile than Bank of Nova. It trades about 0.07 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.07 per unit of risk. If you would invest 6,895 in Precision Drilling on February 14, 2024 and sell it today you would earn a total of 212.00 from holding Precision Drilling or generate 3.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Precision Drilling vs. Bank of Nova
Performance |
Timeline |
Precision Drilling |
Bank of Nova Scotia |
Precision Drilling and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Precision Drilling and Bank of Nova Scotia
The main advantage of trading using opposite Precision Drilling and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Bank of Nova Scotia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.Precision Drilling vs. BP PLC ADR | Precision Drilling vs. Ecopetrol SA ADR | Precision Drilling vs. Suncor Energy |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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